Welcome to the CareCloud, Inc. Second Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I will now turn the call over to your host, Kim Blanche, CareCloud's General Counsel. Ms. Blanche, you may begin.

Good morning, everyone. Welcome to the CareCloud's second quarter 2023 conference call. On today's call are Mahmud Haq, our Founder and Executive Chairman; Hadi Chaudhry, our Chief Executive Officer, President and Director; and Larry Steenvoorden, our Chief Financial Officer. In addition, Bill Korn, our Chief Strategy Officer, will be available for the Q&A portion of the call. Before we begin, I would like to remind you that certain statements made during this conference call are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. All statements other than statements of historical facts made during this conference call are forward-looking statements, including, without limitation, statements regarding our expectations and guidance for future financial and operational performance, expected growth, business outlook and potential organic growth and acquisitions. Forward-looking statements may sometimes be identified with words such as will, may, expect, plan, anticipate, upcoming, believe, estimate or similar terminology and the negative of these terms. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. These statements reflect our opinions only as to the date of this presentation, and we undertake no obligation to revise these forward-looking statements in light of new information or future events. Please refer to our press release and reports filed with the Securities and Exchange Commission, where you will find a more comprehensive discussion of our performance and factors that could cause actual results to differ materially from these forward-looking statements. For anyone who dialed into the call by telephone, you may want to download our second quarter 2023 earnings presentation. Please visit our Investor Relations site, ir.carecloud.com, click on News & Events, then click IR calendar, click on Second Quarter 2023 Results Conference Call and download the earnings presentation. Finally, on today's call, we may refer to certain non-GAAP financial measures. Please refer to today's press release announcing our second quarter 2023 results for a reconciliation of these non-GAAP performance measures to our GAAP financial results. And with that said, I'll now turn the call over to our CEO, Hadi Chaudhry. Hadi?

Thank you, Kim, and thanks to all of you for joining our second quarter 2023 earnings call. Before I jump in, I would like to take a minute to introduce Larry Steenvoorden, who joined us in July as our new Chief Financial Officer. Larry brings with him extensive experience he has spent time as a CFO in several different areas of the health care space. Our team is looking forward to working with him as Bill transitions into his new role as Chief Strategy Officer. He will be working closely with Larry to get him quickly up to the speed. We have several meaningful developments that will contribute to our long-term success to discuss today. But first, I will start by providing a quick overview of our quarterly results. The second quarter revenue came in at $29.4 million and adjusted EBITDA came in at $3.8 million. This compares to revenues of $37.2 million and adjusted EBITDA of $7 million in second quarter last year. Taking a step back and looking at the quarter as a whole, there were a few main areas that contributed to these numbers coming in lower than the prior year period, which includes softness in medSR professional services, a slower conversion ramp for wellness revenue and the loss of revenue from two large customers due to health system mergers, as previously announced. Larry will go into further details on these developments and provide insight to the results. Despite these short-term challenges, our core tech-enabled RCM offering is performing well and meeting the evolving needs of our providers. We believe that we have taken the necessary actions to address the near-term issues we are facing, and over the long-term, focus on several emerging avenues of growth that include our generative AI offering powered by our relationship with…

Thank you, Hadi, and hello, everyone. I appreciate the kind words from those of you that have already reached out, and I'm excited about getting started in the new seat. CareCloud's strategy is focused on being the front runners in the market and it's an exciting time to join the company and a very motivated and passionate team. With that, let me turn to the financials. Revenue in the quarter was $29.4 million compared to $37.2 million in Q2 2022. The year-over-year decline is primarily a result of the factors that Hadi mentioned, softness in medSR and a slower conversion ramp for Wellness revenue, as well as the loss of revenue from two large customers due to health system mergers. Regarding medSR, after the acquisition, a large EHR vendor stopped allowing their clients to contract with us for professional services because they viewed CareCloud as a direct competitor in the EHR space. We saw the impact of this play out in the last quarter. In light of this, our team started to establish stronger Meditech relationships and leverage more RCM cross-selling opportunities. The expectation was that through these relationships and with the organic sales, the gap could be bridged to deliver growth as originally projected. However, this did not materialize. We still believe this is the right approach to get us back on track. And in light, we anticipate medSR's MediTech-related revenue and RCM revenue will increase for the full year, but it will not be enough to offset the decline in professional services this year. The second area identified was in Wellness. The real live ramp did not pan out as steep as initial forecast predicted. Now that we have a year of experience and more data is available, it is becoming clear that it will take longer to…

Thank you, Larry. As Hadi expressed earlier, we feel that our solutions are well positioned in the market. We are executing on the plan to overcome our short-term challenges, and there are several opportunities that will benefit us over the long-term. I would like to thank our employees, customers and shareholders for all they do to support the CareCloud mission. Thank you. Operator?

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session for analysts. [Operator Instructions] Our first question comes from Jeffrey Cohen of Ladenburg Thalmann. Please go ahead.

Hey. Good morning. Hi. Hadi, Larry and Bill. How are you?

Good morning, Jeff. Yes, we are very well. Thank you. How are you?

It's fine. So I know that Larry went through a few of the shortfalls in some of the contracts on time and congrats on buying up the Force contract. But Larry, I guess the question is any macro themes that you're seeing over the past quarter as far as position or organization spending patterns that you can talk about?

Can you able to little elaborate it further, Jeff, please?

Just from a macro standpoint, are you seeing any themes out there as far as your space with utilization or orders that are out there in North America the past quarter?

Not exactly, but we do see from the medSRd perspective, like any other consultancy businesses, some impact. But I think for us, it's not primarily driven by the overall – the advisory and the consultancy business impact. For us, at least it's that large vendor driven. Because you all as you understand, there are a couple of vendors, just three, which covers about 80% of the market share in that space. So if the largest one thinks that they should not be working with us, there will be a significant impact. But other than that, no, we have not.

Okay. And anything to speak of as far as utilization recently or any geographical strength or weakness to call out as far as specific specialties or specific geographies that you can talk about?

No. Again Jeff, we have not seen any such occurrence. But I think we do see a lot of at least these discussions more towards this, the next – the upcoming technologies, I would say, between the confusion of the people and waiting for the next and the right technology to be used and more referring to these AI-based upcoming technological tools and the movement towards the value based, how the two pieces are going to get together for – and from the preventative medicine as well. But not anything specific that we have seen at least yet.

Okay. Great. Then lastly for us, any commentary on the regenerative partnership with Google Cloud as far as rollout and talk about which specific offerings of yours that is being embedded in and how you would expect that to play out over the coming months or quarters? Thank you.

Sure. Thanks, Jeff. And if we just zoom out just to give you, first of all, the perspective of how this partnership has come together. So this was – I was able to meet earlier this year in a meeting with the CEO of the Google Cloud. The idea was that or the thought was – and if you think about CareCloud or previously known as MTBC when started in 1999, our focus was or how we started was how to focus the small to medium practices primarily and bring innovation and technology and converting them from the conventional medical billing conventional RCM into more tech-enabled RCM and providing them with the tools such as EHR and all of those. Fast forward for these last 20 years now, we have the data, the clinical and financial because of our proprietary software and the technology, we started investing, let's say, from the last over five years by establishing our own AI or the data science department to see how we can – what we can achieve with the of our own skilled people and the skill set. It never have been enough to get to the level of where the AI technology exists today. So when Google launched their product or whether the ChatGPT launched their product on the AI, on the generative AI, the one – if you just step back from that perspective and think about it – and let's talk about Google. They launched their Vertex AI, which is their AI, a trained AI model and the engine. And then they started focusing on the health sector, and they're calling it the Med-PaLM model, which is an AI trained model for the health care industry. But when we talk about it, that model is trained only on the…

Okay. Perfect. Thanks for taking our questions.

Thank you. Thanks, Jeff.

Thank you. The next question comes from Neil Chatterji of B. Riley. Please go ahead.

Hi. Thank you. This is Anderson on for Neil. You called out the weaknesses in Wellness and Professional Services in Q2. How do you see those recovering going forward in the second half and in 2024?

I can talk about from the business perspective. And Larry, if you want to add any other color to it. Just let's talk with the Professional Services first. So for Professional Services, if you think about it and just to – the largest vendor that I've been talking about and just to put the things in perspective, if you talk about activation services, one activation project for that largest health system could potentially have, let's say, $1 million at an average project in revenue. The other alternative that we are working on, which is Meditech as an example, their average activation could only be, let's say, a $200,000 a project. So for us to bridge that gap, it's taking this time to get there. The other – the second major line of business, probably where we anticipate we should be able to recover or should be able to do a good job with this Professional Services is leveraging those relationships in the health system space to sell our RCM services. As you may recall, last year, when we presented the numbers for Professional Services division, we were able to increase the revenue of RCM by roughly 300% compared to prior to acquisition. So both of these two – and we see a – may not be the similar 300%, but there is a decent increase on the RCM revenue compared to the last year as well. So our RCM business line under MedSR is growing. Our Meditech business line is also growing, and that's opening even further door for us into a more partnered possible relationship on the RCM with Meditech and also our Middle East opportunity. So we believe between the two, we will keep on growing. Our goal would be. And again, we will share the numbers at the end of this year when we close the year. Our goal would be that at least with these two possible lines and the opportunities that exist for us in Middle East, we should be able to get back to where we should be by the end of next year. Again, that's one goal. We yet to see how the things plays out until the end of this year. But we do see a lot of these opportunities and the path for us to get back to where we should be.

Great. Thank you. And then on your Middle East expansion, congrats on the UAE trade license. When do you anticipate recognizing revenues there?

Great. And I'll answer it. And just to mention that Dwight who is heading over MedSR as well as the Middle East division, he also joined us for the Q&A session. And Karl from the Force division, the head of the Force, he also had joined us during the Q&A session. So let me answer that, and then I'll hand it over to Dwight to give you a little more color. We – in the current phase, we are going through the process of finding the right boots on the ground resources we have the knowledge you can go and help us sell into that space and there are a number of other activities that we are projecting. Our internal goal is to at least have been able to sign R&D a few deals before the end of this year, which should have a revenue recognition for us into the next year. Because there's no matter what you do by the time we signed the deal, get the resources aligned, get the projects initiated, the revenue recognition will take at least six months from the point of signing the deal. So this is a bigger picture. But Dwight would you like to give just a little more color like how you're doing on the Middle East side for Neil and the other people listening.

Sure, absolutely. Good morning and thank you for taking some time. So yes, in UAE, we're excited about the opportunities there and not only UAE, but also the GCC. So we're seeing those six Gulf countries really bringing together quite a few and exciting opportunities for us. My colleague said earlier, I attended a few conferences this year and so did Karl. We're seeing a lot of excitement in what we're bringing to the table, both from a professional services and a solution point of view. Looking this quarter, really, we're hiring our business development team and getting them up and running. And then with our goal really, as we move through Q3 and Q4 of using the Arab Health Summit, which is in January of 2024 is really our time that we can come forward and show all of our solutions. It's a huge conference, almost 65,000 attendees. So that really becomes where we're porting towards as we move through Q3 and Q4 and building that excitement and those opportunities to come.

Great. Thank you so much for taking my question.

Thank you.

Thank you. The next question comes from Derek Greenberg of Maxim Group. Please go ahead.

Hi. Good morning. I wanted to touch on Wellness a little bit more and possibly just some things you're learning as that process continues to roll on and some actions you may be taking to improve onboarding for the product?

Thank you, Derek. And thanks for your question. So I think if – I’ll just hit it in a way, first to fall even other than for our clients or the doctors or the providers and for us and the doctors are also trying to adapt to this new preventive care and accept and adopt to the preventive care technologies or the options and the opportunities. And then also for the patients, it's a paradigm shift from every time when you feel, say, going to the doctor's office and seeing them in person from that shift to the telehealth appointments. Now this is another paradigm shift, where you were not sick, you're not feeling sick, but there are still certain things in the case of the chronic conditions that can proactively be managed. So that paradigm shift is taking us time to convince the patient that this is something good for you in the long-term. Those – let's say, onetime in a month, 20 minutes or 45 minutes and in case of the diabetes or blood pressure taking those meetings every day, how that's going to change your overall health in the long-term. Yes, we are continuing to adapt other ways as an example, what are the right times to call the patients. If the patient is more available during the lunch hour versus in the evening hours, how can we leverage our automated text messages, how we can keep sending them a text message to remind them from the call before they have to get on the call because there are leakages in all of these places, number one, convincing the patient. The number second, they may not be available for the call even though the call was scheduled. So all of these pieces, we do have the technology…

No, I think I that just covers it from the overall business strategy, and then how we're thinking about this and moving into really a 2024 catalyst and not a significant revenue driver for the share.

And Derek, the good thing for us is the business is signed. We have already the acknowledgment for the doctors. So we have a good number to focus on, and we continue to see the attraction from even our existing client base in addition to the new logos. And now when we are selling our end-to-end solution, sometimes this becomes a hope for us. If they sign up for chronic care and remote patient monitoring, it comes for us as an entire end-to-end deal instead of just a remote patient monitoring and chronic care management. And let's say, we do not have any insight from the CMS in terms of the next year's reimbursement rates, but we hope and again, it's just a hope, it's based on all the moving parts of this industry that there could potentially be some improvement or some – to give more attraction to the Chronic Care management because in the bigger picture, this is going to improve the expenditures of the government at large.

Okay. Great. Thanks for the color. And then my other question is just what the bookings in the quarter were and how that compared to last year? And then maybe if you could just touch on the therapy offering trial, how that's progressing?

Sure. Derek, and I missed the last part, please of your question. Can you repeat that, please, the last piece of your question? The color on…

My apologies. The question was bookings in the quarter. And then the second part was just the therapy offering trial you guys are working on how that's tracking.

Got it. Okay. Sure. So for – in order from the booking standpoint, if you compare the first half of 2022 compared to the first half of 2023, we have done better compared to the last year. We shared the number of the last quarter booking to be, I think, around was $7 million what we booked for the second quarter of 2022. So the two quarters together first and the second of last year because this quarter, as on the reason we kept sharing the by quarter booking numbers just to make sure that how we are ramping up our sales engine and the marketing engine. And this year, we plan not to give the quarterly booking numbers. But just to give you a color, we have done better compared to the last – the first half of last year, but the mix is a little different. We see more traction and attention towards the chronic care management and the remote patient monitoring, so that makes this change. Last year, it was, let's say, 40 to 60. So this year, it's more probably between 70% and 30%, 70% on the digital health and 30% on our tech-enabled core RCM and the SaaS bookings. So – but that translates basically and the reason I'm giving that color, even though the bookings are higher, there's a different go-live time. The revenue recognition is going to be a little different. Tech-enabled average six months, we can start recognizing the revenue. And in the case of chronic care and remote patient, it looks like with the full ramp, gradual ramp. It's going to be somewhere over in a year. And so now to the second part of your question, Derek, for the therapy. We had some early adapters as I mentioned last year…

Okay. Great. Thanks for answering my questions.

Thank you.

Thank you. There are no further questions. I will turn the call back to Kim Blanche for closing remarks.

On behalf of the company, I'd like to thank everyone who has joined us on today's call. We appreciate your participation and your interest in us as a company, and we look forward to speaking with you again next quarter. Thank you, everyone, and have a great day.

Thank you.

Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.